Buy HCL Technologies; target of Rs 1220: Angel Broking
Brokerage house Angel Broking is bullish on HCL Technologies and has recommended 'buy' rating on the stock with a target price of Rs 1,220 in its research report of dated October 18, 2013.
October 21, 2013 / 12:36 IST
Angel Broking's report on HCL Technologies
For 1QFY2014, HCL Technologies (HCL Tech) marginally disappointed on the revenue front but exceeded expectations considerably on the operational performance as well as on the overall bottom-line front. The growth during the quarter was once again led by infrastructure services, revenues from which grew by 8.7 percent qoq. HCL Tech won over ~USD1bn+ worth of multi-year, multi-million dollar deals during the quarter, thus sustaining its momentum of signing ~USD1bn+ total contract value (TCV) worth of deals, over the past few quarters.For 1QFY2014, HCL Tech reported a revenue of USD1,270mn, up 3.5 percent qoq, on the back of a whopping 8.8 percent qoq USD revenue growth in CC terms in its infrastructure services business. It also announced 9 large transformational engagements during the quarter. In INR terms, the revenue came in at Rs 7,961cr, up 14 percent qoq. The company’s EBIT margin grew substantially by 309bp qoq to 23.8 percent despite giving wage hikes during the quarter, which is commendable. The PAT stood tall at Rs 1,416cr, up 19 percent qoq, aided by strong operating gains.Outlook and valuation: HCL Tech has recorded an ~3.2 percent CQGR in its revenue over the past eight quarters. This is primarily on the back of infrastructure management services (IMS) maintaining growth momentum and growing substantially higher than the company’s average growth rate. However, a single service line-led growth always reduces comfort on sustainability. The Management noted that growth in revenues from software services will improve when the respective component in the large deals won recently ramps up. We expect HCL Tech to post USD and INR revenue CAGR of 13.4 percent and 19.4 percent, respectively, over FY2013-15E. We expect the EBIT and PAT to post a 22.7 percent and 24 percent CAGR over FY2013-15E. We value the company at 14x FY2015E EPS and give it a target price of Rs 1,220. We recommend an Accumulate rating on the stock," says Angel Broking research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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